World markets fall ahead of expected dismal US jobs data

London/Singapore — World share markets fell on Thursday as nerves over jobs data likely to lay bare the economic carnage from the coronavirus pandemic outweighed a $2-trillion US stimulus package.

On Wednesday, the US Senate backed the huge bill aimed at helping jobless workers and industries reeling from Covid-19, with the package heading for the House of Representatives for vote on Friday.

Yet already questions flew over whether the bill would do enough to soften the disease’s economic hammer blow, with investors bracing for a jobs data forecast to show a huge spike in unemployment in the world’s biggest economy.

Europe’s broad Stoxx 600 fell 1.6%, with bourses in Frankfurt, London and Paris all down about 2% as a two-day rally faltered. The sour mood was worsened by slumping consumer morale in Germany and data showing stagnant retail sales in Britain last month, even before the virus hit.

It followed a mixed session in Asia, where MSCI’s broadest index of Asia-Pacific shares excluding Japan rose 0.7% but regional performances varied. The Nikkei snapped three days of gains with a 4% drop, while Australia’s benchmark rose for a third day — its longest winning streak in six weeks.

Global markets have lost about a quarter of their value in the last six weeks of virus-driven selling.

And while investors have found a measure of support as governments and central banks launch unprecedented support measures, investors were struggling to work out how bad the coronavirus impact would be.

“No-one is sure how long things are going to be locked down for, how wide the virus will spread in the US, what the death toll and hit on the economy will look like,” said Salman Baig, portfolio manager at Unigestion in Geneva.

Unemployment to surge

Markets were to get a glimpse of the on-the-ground damage to the US economy, with data on jobless claims due at 12.30pm GMT. Forecasts in a Reuters poll ranged from 250,000 to 4-million unemployment claims.

RBC Capital Markets economists had expected a national figure of more than 1-million, but say “it is now poised to be many multiples of that”, as lockdowns drive deep layoffs. “Something in the 5-million to 10-million range for initial jobless claims is quite likely.” That compares to a 695,000 peak in 1982.

Citi Private Bank said the peak total could reach 15%-18% of the total US workforce, some 25-million people.

E-mini futures for the S&P 500 last traded down 2%, while the MSCI world equity index, which tracks shares in 49 countries, fell 0.2%. 

The money at stake in the stimulus bill amounts to nearly half of the $4.7-trillion the US government spends annually. But it comes against a backdrop of bad news as the coronavirus spreads and signs of economic damage grow across the globe.

Tokyo’s governor has asked residents to avoid going out and to “act with a sense of crisis”. Spain’s coronavirus death toll has overtaken China’s, and there have been more than 21,000 deaths globally. In Singapore, the economy suffered its biggest contraction in a decade in the first quarter and factories posted their largest output drop since records began in 1983.

The sense of unease was also reflected in currency markets.

The dollar lost 0.4% against a basket of six major currencies to 100.50 as its recent rally continued to lose steam. It also slumped 0.8% against the perceived safety of the yen. The softer greenback also buoyed emerging-market currencies, with MSCI’s index touching a one-week high.

Oil fell as fears of plunging demand outweighed expectations of support from the US stimulus. Brent crude futures fell 3% to $26.55.

Reuters